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Blackstone to Invest $2 Billion in Cheniere Energy in Bet on LNG Expansion

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By Jim Polson – Feb 27, 2012 7:49 AM CT

Cheniere Energy Partners LP (CQP) said Blackstone Group LP (BX) agreed to invest $2 billion toward construction of a $5 billion natural-gas export terminal.

The financing is a “significant milestone” toward Cheniere’s plan to build the plant, Chairman and Chief Executive Officer Charif Souki said in a statement today. If built, the plant would be the first constructed in more than four decades to export U.S. natural gas by ship.

Cheniere Energy is seeking final approval from the Federal Energy Regulatory Commission for the plant, which would liquefy gas for export from its existing import terminal in Cameron Parish, Louisiana. The Houston-based company obtained Energy Department approval to export after U.S. production of the fuel surged from hydraulic fracturing.

“Obtaining this financing will be a significant milestone for the advancement of construction for the first two liquefaction units,” Charif Souki, chairman and chief executive officer of Cheniere Energy Partners and its parent, Cheniere Energy Inc. (LNG), said in today’s statement.

The Blackstone entities have agreed to buy 111 million new senior subordinated paid-in-kind units for $18 billion each, according to the statement. Final terms are contingent on Cheniere securing debt financing.

Starting Construction

Cheniere expects to obtain the remaining financing by March 31 and to begin construction by June 30, according to the statement.

The units that Blackstone is buying will pay 4.2 percent interest quarterly and convert to partnership common units once the first two sections of the plant begin commercial operation. Cheniere Energy Partners will use cash from the sale to buy the pipeline that connects the terminal to the U.S. gas pipeline network from Cheniere Energy Inc., according to today’s statement.

The announcement was made before regular trading began on U.S. markets. Cheniere Energy Partners rose 6.7 percent to $22.30 at 8:46 a.m. in New York. Cheniere Energy Inc. rose 17 percent to $16.42.

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